On July 25, in Vientiane, Laos, Indian External Affairs Minister Dr. Subrahmanyam Jaishankar met his Chinese counterpart Wang Yi on the sidelines of ASEAN-related meetings. This was the second such meeting in the last month; they met earlier in Astana on the sidelines of the Shanghai Cooperation Organization Heads of State summit. The meetings have brought the spotlight back onto the strained relationship between India and China.
In a post on the social media platform X after the Vientiane meeting, Jaishankar said:
The state of the border will necessarily be reflected on the state of our ties. Agreed on the need to give strong guidance to complete the disengagement process. Must ensure full respect for the LAC and past agreements. It is in our mutual interest to stabilize our ties. We should approach the immediate issues with a sense of purpose and urgency.
Meanwhile, Wang Yi reiterated that it is in “the interests of both sides to get China-India relations back on track.”
Although many see this as little more than a routine interaction, which can only lead to marginal progress, if any, this meeting comes at a time when both nations are dealing with complex domestic and international pressures that necessitate a re-evaluation of their bilateral ties.
Although such diplomatic interactions between the two countries have become more frequent, the India-China relationship in the recent past has been characterized by a fragile balance between cooperation and competition. The border disputes between the two Asian giants, particularly in the Ladakh region, have been a persistent thorn in the side of bilateral relations. Despite multiple rounds of talks and agreements aimed at maintaining peace and tranquility along the Line of Actual Control (LAC), skirmishes and standoffs have continued to occur, the most significant flashpoint being the Galwan Valley clash in June 2020.
In this climate of mutual distrust, it is difficult to be optimistic about the China-India relationship. However, despite the geopolitical tensions, economic realities present a compelling case for cooperation. Both countries are slowly coming to terms with the fact that cooperation is the only way forward.
India is finding that it has little choice but to allow Chinese investment in its manufacturing sector. India’s “Make in India” effort, which aims to transform India into a global manufacturing hub, has failed to pick up the desired steam despite multiple high-profile projects. While India doesn’t lack the potential to realize such an ambition, aggregate performance indicators have not been very encouraging. Early reports indicate that “Make in India” has been off to a slow start. The share of manufacturing in the gross value added (GVA) by the economy, for example, showed no improvement after the launch of the Make in India initiative. FDI figures tell a similar tale.
A goal this ambitious requires significant capital, technology, and expertise, areas where China excels. Moreover, Chinese investments in sectors such as telecommunications, infrastructure, and consumer goods have played an important role in India’s economic growth over the years. Despite restrictions on Chinese businesses, India’s imports from China exceeded $100 billion last year.
All is not well in Beijing either. China is finding it increasingly difficult to operate in Western markets. The China-U.S. trade war, coupled with growing protectionist policies in Europe, has limited China’s access to its traditional export markets. Additionally, China’s own economic transition toward higher-value manufacturing and the rise in labor costs have made cheap manufacturing increasingly unviable. China seeks new markets and investment opportunities, and India can be an attractive partner.
Thus, the economic alignment between India and China suggests a pragmatic basis for engagement. The statements by both the ministers reveal an understanding of these mutual interests. Both sides have held multiple rounds of talks to de-escalate tensions and establish protocols to prevent future conflicts. There has been little progress, but the recent disengagement in certain friction points along the LAC is a positive development. However, this process has been slow and punctuated by setbacks. Trust remains a significant issue, exacerbated by the Galwan Valley clash.
China’s incremental territorial advances, often referred to as “salami slicing,” are a source of constant concern for India. These tactics involve small, non-confrontational moves to incrementally change the status quo along the border. For India, these moves are not just about territorial encroachment but also about the strategic signaling of China’s intentions. In response, India has been enhancing its border infrastructure, increasing its military presence, and forging strategic partnerships with other nations to counterbalance China’s influence.
While Jaishankar’s emphasis on the importance of three mutuals – “mutual respect, mutual interests, and mutual sensitivity” – during this meeting indicates India’s expectations from China, it’s clear that India’s strategic positioning extends far beyond its immediate neighborhood. The presence of Indian National Security Advisor Ajit Doval at Nguyen Phu Trong’s funeral in Vietnam alongside representatives from China, South Korea, and Japan, and Prime Minister Narendra Modi’s planned visit to Ukraine, underscore India’s intent to engage with a broad spectrum of global players. By fostering such diverse relationships, India aims to enhance its geopolitical leverage, including with China.
Thus, India’s approach to China can be seen as an indicator of a broader strategy to assert its influence in global affairs. A prolonged border dispute with China can exhaust India’s resources and focus. Moreover, a strained relationship with China might hurt India’s economy. To rally, the Indian economy needs all the resources it can marshal. However, the responsiveness of China and the willingness of Chinese companies to invest in India remain uncertain. Concerns about future restrictions and geopolitical tensions may deter Chinese businesses from fully committing to the Indian market.
Despite the geopolitical tensions, it’s clear that economic cooperation remains a potential area of mutual benefit. Sectors such as technology, infrastructure, and renewable energy present significant opportunities for collaboration. China’s expertise in large-scale infrastructure projects can complement India’s developmental needs. Similarly, India’s burgeoning technology sector can offer innovative solutions and market opportunities for Chinese firms.
However, economic cooperation is not without challenges. The Indian government has imposed stricter regulations on Chinese investments following the Galwan clash, citing national security concerns. Chinese companies face increased scrutiny and regulatory hurdles, impacting their willingness to invest. Moreover, the broader geopolitical context, including China’s assertive policies in the Indo-Pacific region, influences the economic relationship. Both nations need to navigate these complexities to realize the full potential of economic collaboration.
However, even if New Delhi and Beijing decide to collaborate on the economic front, it might still result in a “close but no cigar” situation. The fact remains that in international politics, economic interests aren’t everything. The rehabilitation of China-India ties is a complex and multifaceted process. Economic necessities, historical grievances, and geopolitical strategies will all play a role.
While there is a pragmatic basis for cooperation, significant hurdles remain. An uneasy peace, characterized by cautious engagement and selective collaboration, is likely to define the relationship in the near future. Both nations will need to navigate this intricate landscape with a long-term perspective, balancing immediate economic benefits against broader strategic interests.
Ultimately, the future of China-India relations will depend on the ability of both nations to manage their differences while capitalizing on areas of mutual benefit. It will require a delicate balance of competition and cooperation, guided by a realistic and levelheaded understanding of each other’s strategic imperatives. For now, an uneasy peace seems the most realistic outcome, but with sustained efforts and mutual trust-building, a more stable and cooperative relationship may emerge over time.
Put simply, will mutual collaboration benefit both New Delhi and Beijing? Yes. Will shared interests lead to a thaw in relations? That remains to be seen.